Lawyers to address DRC impasse

08:52, May 13, 2010      

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Zijin Mining Group Co and its partner China-Africa Development (CAD) Fund have sent their lawyers to negotiate with Copperbelt Minerals Limited on their bid for the latter's subsidiary Platmin Congo after the Democratic Republic of Congo's (DRC) minister of mining cast doubt on the legality of the deal.

"Copperbelt will communicate with the DRC's Premier, and the result will come out before the end of July, which is the deadline for the transaction," sources close to the matter said on Wednesday, adding that "misunderstandings" exist between the DRC government and Chinese buyers.

Zijin and State-backed CAD Fund announced plans on May 7 to jointly acquire a 40 percent stake in Platimin Congo from Copperbelt for about $280 million.

But foreign media reported that a top official from the DRC's minister of mining said on May 8 the deal might be illegal.

The Chinese government may approve the bid next month, although a nod from the DRC may be delayed, according to Bloomberg reports on Wednesday, citing Zijin Chairman Lan Fusheng.

"I believe that the deal will eventually receive approval from the DRC government, because the mining project needs investment," Lan was quoted as saying, adding that the project has no legal issues, but some misunderstandings in the plan.

Lawyers to address DRC impasse

"Zijin's overseas expansion comes out less fruitful if compared with their business in the domestic markets It still takes time for the miner to understand the foreign country's business environment," said Liu Minda, a non-ferrous analyst at Huatai Securities, adding that the deal's results remain murky and subject to resolution of the DRC's objections.

The DRC holds a vast amount of valuable natural resources including gold, copper, diamonds and cobalt - most of which remain unexploited due to the laggard economy and unstable political situation.

"The country holds very high-grade minerals, but most Chinese companies can hardly make huge profits through their investments in the DRC because of high taxes and rampant corruption," said Liu.

In addition, Western countries, which have concerns over Chinese firms penetration in Congo, also hindered domestic firms' expansion pace in an African country that has heavy external debt to Europe, America and the International Monetary Fund, said Li Wentao, an associate researcher at China Institutes of Contemporary International Relations.

Li added that the DRC government also encourages local companies to participate into the mining industry for the country's own interest.

"Fortunately, it will not impact on Zijin's business heavily if the bid fails given the small size of the investment if compared with the miner's large market capitalization," Liu said.

Zijin shares edged up 0.49 percent to close at 8.26 yuan ($1.21) on Wednesday, compared with Shanghai Composite Index's rise of 0.31 percent.

Source: China Daily


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